Ground Floor, Suite 8
Churchill Court
331-335 Hay Street
Subiaco WA 6008
T: + 61 (08) 9381 4322
F: + 61 (08) 9381 4455
ABN: 50 120 580 618
29 September 2020
The Manager
The Australian Securities Exchange
The Announcements Officer
Level 4/20 Bridge Street
SYDNEY NSW 2000
2020 ANNUAL REPORT
Please find attached Key Petroleum Limited’s 2020 Annual Report.
This announcement has been authorised by the Board of Directors.
For more information please contact:
IAN GREGORY
Company Secretary
Key Petroleum Limited
Telephone: +61 (0) 8 9381 4322
Email: investors@keypetroleum.com.au
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
ACN 120 580 618
CORPORATE INFORMATION
ABN 50 120 580 618
Directors
Geoff Baker (Non-Executive Chairman)
Dennis Wilkins (Non-Executive Director)
Min Yang (Non-Executive Director)
Company Secretary
Ian Gregory
Registered Office and Principal Place of Business
Suite 8, Churchill Court
331-335 Hay Street
SUBIACO WA 6008
Telephone: +61 8 6381 4322
Facsimile: +61 8 6381 4455
Solicitors
Mizen & Mizen
Barristers & Solicitors
69 Mount Street
WEST PERTH WA 6005
Bankers
National Australia Bank Limited
1232 Hay Street
WEST PERTH WA 6005
Share Register
Computershare Investor Services Pty Ltd
Level 11
172 St George’s Terrace
PERTH WA 6000
Telephone: +61 3 9415 4000 or 1300 850 505 (within Australia)
Auditors
Bentleys
Level 3, 216 St George’s Terrace
PERTH WA 6000
Internet Address
www.keypetroleum.com.au
Email Address
investors@keypetroleum.com.au
Stock Exchange Listings
Key Petroleum Limited shares (Code: KEY) are listed on the Australian Securities Exchange
1
CONTENTS
Chairman’s Report
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
3
4
15
16
17
18
19
20
50
51
56
2
CHAIRMAN’S REPORT
Dear Shareholders
On behalf of the Board of Directors it is my pleasure to deliver the Key Petroleum Limited (‘Key’ or ‘Company’) Annual Report for the year
ended 30 June 2020.
During the year the Company focused on activities in its Perth and Cooper Eromanga Basins Permits located in Western Australian and
Queensland respectively.
A Farmin Agreement with Pancontinental Oil and Gas NL in ATP 920 and 924 was signed in October 2019. Key’s application to renew the
three (3) Cooper Eromanaga Basin Authorities to Prospect, ATP 783, 920 and 924, for a further four (4) years was subsequently approved in
November 2019. Efforts continue towards drilling with access and compensation agreement signed, and planning has begun for 2D seismic
acquisition to take place in the following permit year.
The Company is pleased to report decommissioning activities undertaken in Production Licence L7 were completed during the period without
incident with the focus now shifting to progressing the work program with Joint Venture Partner, Triangle Energy (Global) Limited.
2020 saw the unfortunate ongoing impact of the COVID-19 pandemic which restricted Key’s ability to meet work program commitments of
one (1) exploration well within Exploration Permit EP 437 within the required time frame. The Company was subsequently granted a 12 month
suspension and extension from the Department of Mines, Industry Regulation and Safety which ends in May 2021.
The flow on from COVID-19 saw the Company undertake significant cost saving measures which include, among other initiatives, the deferral
of payment of all Directors’ Fees and voluntary staff pay reductions of 30%. I am appreciative of the support provided by the Board,
Management and Staff through this difficult period.
Key is heading into the new financial year with the focus firmly remaining with its onshore Perth Basin and Cooper Eromanga Basin assets.
The scrip sale of the Company’s 40% interest in offshore Perth Basin permit WA-481-P to Pilot Energy Limited also provides Key with exposure
to the potential development of a renewable energy project in Western Australia’s Midwest.
We would like to thank all the employees, Directors and Shareholders for their ongoing support throughout the year and look forward to a
positive year ahead in 2020/2021.
Yours sincerely
Geoff Baker
Chairman
29 September 2018
3
DIRECTORS’ REPORT
Your Directors submit their report on the consolidated entity (referred to hereafter as the Company or Group) consisting of Key Petroleum
Limited and the entities it controlled at the end of, or during, the year ended 30 June 2020.
DIRECTORS
The names and details of the Company’s Directors in office during the year and until the date of this report are as follows. Where applicable,
all current and former directorships held in listed public companies over the last three years have been detailed below. Directors were in office
for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Geoff Baker, BCom, LLB, MBA (Non-Executive Director, appointed 1 March 2015 and Non-Executive Chairman appointed 31 August 2020)
Mr Baker is an Australian solicitor residing and working in Hong Kong and UK and has over 30 years of experience assisting companies in
conducting business in China in addition to providing advice in mining, resources and finance. Currently a Non-Executive Director of ASF
Group Limited, Rey Resources Limited, ActivEX Limited and BSF Enterprise PLC. Within the last three years Mr Baker was also a non-
executive director of former ASX listed public company Metaliko Resources Limited (resigned 12 January 2017).
Min Yang, (Non-Executive Director, appointed 28 January 2014)
Ms Yang resides in Hong Kong and has over 22 years of experience with private and state-run businesses in China and has expertise in the
identification of opportunities in resources and financial investment. Currently the Director and Chairman of ASF Group Limited and a Non-
Executive Chairman of Rey Resources Limited, ActivEX Limited and BSF Enterprise PLC. Within the last three years Ms Yang was also a
non-executive director of former ASX listed public company Metaliko Resources Limited (resigned 27 October 2016).
Dennis Wilkins, BBus, AICD, ACIS (Non-Executive Director, appointed 5 July 2006)
Mr Wilkins is an accountant who has been a Director, Company Secretary and acted in a corporate advisory capacity to listed resource companies
for over 25 years.
Mr Wilkins previously served as the Finance Director and Company Secretary for a mid-tier gold producer and spent five years working for a
leading merchant bank in the United Kingdom. Resource postings to Indonesia, South Africa and New Zealand in managerial roles has broadened
his international experience.
Mr Wilkins has extensive experience in capital raising, specifically for the resources industry, and is the principal of DW Corporate Pty Ltd
which provides advisory, funding and administrative management services to the resource sector. Mr Wilkins is also currently an alternate
director of Middle Island Resources Limited.
Rex Turkington, BCom (Hons), BCA, GAICD, AAFSI, ADA1(ASX) (Non-Executive Director, appointed 18 July 2012 and Non-Executive
Chairman, appointed 14 January 2014, Retired 31 August 2020)
Mr Turkington is a highly experienced corporate advisor and economist who has worked extensively in the financial services and stockbroking
industry in Australia, specialising in the exploration and mining sectors. He has extensive experience with equities, derivatives, foreign exchange
and commodities, and has participated in numerous corporate initial public offerings and capital raisings for listed exploration and mining
companies. Mr Turkington is currently a Director of an Australian corporate advisory company, offering corporate finance and investor relations
advice to listed companies. He holds a First-Class Honours degree in Economics, is a graduate of the Australian Institute of Company Directors
and is an associate of the Institute of Financial Services of Australia. Within the last three years Mr Turkington was also a non-executive director
of ASX listed public companies TNG Limited (resigned 31 March 2019) and Todd River Resources Ltd (resigned 14 February 2019).
Kane Marshall, BSc/Geology, BCom/Corp.Finance, MPetEng (Managing Director, appointed 3 April 2012, Retired 28 August 2020)
Mr Marshall has over 20 years’ experience working in the international oil and gas industry. In more recent times, he was contracted by Santos
Ltd as a Consultant Petroleum and Production Engineer with the Roma Implementation Team in Brisbane, and prior to that, as a Reservoir and
Petroleum Engineer for both Chevron Australia and Woodside Energy on North-West Shelf projects based in Perth.
Early in 2002 Mr Marshall moved to the United Kingdom where he worked for Highland Energy Limited as a Petroleum Geologist and Reservoir
Engineer and then later with RWE Dea UK Limited as a Petroleum Engineer.
Mr Marshall holds academic qualifications which include a Masters of Petroleum Engineering from Curtin University, Bachelor of Science
(Petroleum Geology) from the University of Western Australia and a Bachelor of Commerce (Investment Finance and Corporate Finance) from
the University of Western Australia.
COMPANY SECRETARY
Ian Gregory, BBus, FGIA, FCGI, MAICD
Mr Gregory is a professionally well-connected Director and Company Secretary with over 30 years’ experience in the provision of company
secretarial, governance and business administration services with listed and unlisted companies in a variety of industries, including oil and gas,
exploration, mining, mineral processing, banking and insurance. He also has expertise which includes launching successful start-up operations
through the development of the company secretarial role and board reporting processes. Mr Gregory currently consults on company secretarial
and governance matters to a number of listed and unlisted companies.
Prior to founding his own consulting Company Secretarial business in 2005 Mr Gregory was the Company Secretary of Iluka Resources Ltd (6
years), IBJ Australia Bank Ltd Group, the Australian operations of The Industrial Bank of Japan (12 years), and the Griffin Coal Mining Group
of companies (4 years). Mr Gregory is a past member and Chairman of the Western Australian Branch Council of Governance Institute of
Australia (GIA) and has also served on the National Council of GIA.
4
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Key Petroleum Limited were:
Dennis Wilkins
Min Yang
Geoff Baker
Ordinary Shares
-
225,372,940(1)
225,372,940(1)
Options over
Ordinary Shares
Performance
Rights
-
-
-
-
-
-
(1) Ms Yang and Mr Baker are both directors of ASF Group Limited which is the ultimate holding company of ASF Oil & Gas Holdings
Pty Ltd which holds shares in Key Petroleum Limited.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year were the acquisition of petroleum permits, and the exploration of these permits with the
objective of identifying economic oil and gas reserves.
DIVIDENDS
No dividends were paid or declared during the year. No recommendation for payment of dividends has been made.
OPERATING AND FINANCIAL REVIEW
Operations Review
The Financial Year 2019/2020 afforded Key Petroleum Limited (“Key”) an opportunity to mature value in its asset holdings. Several prospect
maiden resource statements were announced throughout the year across the Company’s portfolios in the Perth and Cooper Eromanga Basins.
In the first half of the year Key progressed and finalised access agreements for drilling and signed a Letter of Intent with Refine Energy Pty Ltd.
In 2020 the outbreak of the COVID-19 pandemic had a significant effect on most industries and multiple facets of the economy. Despite the
restrictions, Key adapted, and continued to conduct its business with low cost and efficient operations in these trying times.
In November 2019 Key received formal confirmation from the Department of Nature Resources, Mines and Energy, Queensland that Cooper
Eromanga Basin ATPs 783, 920 and 924 have been renewed for a further period of four (4) years. The agreed work programs will enable Key
to demonstrate the promising prospectivity and potential to supply energy for future eastern Australian needs.
The Chandos Updip Prospect within the ATP 783 Canaway Ridge Project has been significantly de-risked from integrating the primary term
work commitments comprising the geochemical survey and seismic reprocessing. A Farmin Agreement was formally executed between Key
and Pancontinental Oil and Gas NL for the Meeba Project, a significant structural trend that lies between the Cuisinier and Inland Oil Fields
within ATP 920 and 924. Key remains confident of attracting aligned investment to near term high impact drilling and exploration programs.
Key announced ‘game changing potential’ on 16 June 2020 in its evaluation of the High Cliff and Kingia plays on the Bookara Shelf (EP 437/L7)
and the broader prospectivity of the northern Perth Basin. Updated prospect resource estimates within the Bookara Shelf Project represent a
material impact, with significant upside potential.
The establishment of Access and Compensation agreements in EP 437 provides Key surety for the remainder of the Permit term and any potential
renewals of the Permit. Key was granted a twelve (12) month Suspension and Extension for EP 437 in light of COVID-19 restricted movement,
and despite these difficulties the Company remains committed to drilling and unlocking the potential of the area.
The Care and Maintenance operations at the Mount Horner Field were successfully conducted without incident. Decommissioning activities
started with the removal of all flowline infrastructure and monitoring bores and are now complete. Additionally, well decommissioning at Mount
Horner was conducted in 2020 with the partial abandonment of Mount Horner-4A and full abandonment operations at Mount Horner-5, 7 and
13, all successfully completed without incident. The remaining two wells and infrastructure are strategic assets that have been left in place for
a possible near-term Pilot Production Program.
Outlook
Key continues to plan for drilling across its portfolio. The Company has continued landholder consultation with a view to start drilling in Cooper
Eromanga Basin within the following financial year. Efforts will also increase towards seismic acquisition campaigns.
Key has in place all regulatory approvals to drill the EP 437 well, with the Refine Energy Rig #1 selected to conduct drilling operations on the
proposed Wye Knot-1 Prospect before the Suspension and Extension Year 3 period is ends in May 2021.
Despite reported misalignment with its L7 Joint Venture Partner, Triangle Energy (Global) Limited, Key is highly confident of progressing an
exciting work program to investigate the Bookara Shelf, which will include the uppermost known extents of the game changing High Cliff and
Kingia plays within L7 and adjacent EP 437. Key is optimistic the planned new 3D seismic and new exploratory drilling in this prolific oil
producing region of the North Perth Basin will transform the Company.
In light of the growing shift towards a clean energy future and the Australian National Hydrogen Strategy, Key has taken its first steps to
participate with its investment in Pilot Energy’s strategy towards renewable energy projects earmarked for the Midwest region of Western
Australia.
5
Finance Review
The Group has recorded an operating loss after income tax for the year ended 30 June 2020 of $145,922 (2019: $780,637).
At 30 June 2020 funds available totalled $642,193 (2019: $446,895).
Operating Results for the Year
Summarised operating results are as follows:
Consolidated revenues and loss
Shareholder Returns
Basic loss per share (cents)
Risk Management
2020
Revenues
$
Results
$
767,527
(145,922)
2020
(0.01)
2019
(0.05)
The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that activities are aligned with the
risks and opportunities identified by the board.
The Company believes that it is crucial for all Board members to be a part of this process, and as such the Board often meets in tandem with
Audit and Risk Management Committee to discuss risk and strategy.
The Board has a number of mechanisms in place to ensure that management's objectives and activities are aligned with the risks identified by
the Board. These include the following:
•
•
Board approval of a strategic plan, which encompasses strategy statements designed to meet stakeholder’s needs and manage business
risk; and
Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets.
6
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than as disclosed in this Annual Report, no significant changes in the state of affairs of the Group occurred during the financial year.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Subsequent to the end of the financial year the following items occurred:
•
•
The Managing Director, Kane Marshall, retired from the board with effect from 28 August 2020 and Rex Turkington retired as Chairman
and Non-executive of the Company with effect from 31 August 2020. Geoff Baker was appointed as Chairman of the board on 31
August 2020. Ric Jason, who was the Company’s Exploration Manager, was appointed as Interim Chief Executive Officer with effect
from 28 August 2020.
On 8 September 2020, Key entered into a term sheet with Pilot Energy Limited whereby Key will sell its 40% interest in the WA-481-
P Permit to Pilot. In consideration for the transfer of its interest, Pilot will issue to Key (or its nominee) in two tranches 21 million shares
in Pilot that will be fully paid ordinary listed shares. The parties will terminate the Joint Venture Agreement between each other in
relation to the WA-481-P Permit. The 21 million shares in Pilot will be issued to Key (or its nominee), subject to approval by Pilot’s
shareholders.
Other than the above, there was no other events occurring after the reporting date.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Group expects to maintain the present status and level of operations and hence there are no likely developments in the Group’s operations.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is subject to significant environmental regulation in respect of its exploration activities.
The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance
with all environmental legislation. The Directors of the Company are not aware of any breach of environmental legislation for the year under
review.
The Group is in compliance with the various environmental legislation and regulations that govern its activities in the jurisdictions in which
it operates.
REMUNERATION REPORT
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
Principles used to determine the nature and amount of remuneration
Remuneration Policy
The Remuneration Committee Charter of Key Petroleum Limited has been designed to align director and executive objectives with shareholder
and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance
areas affecting the Company’s strategic goals. The Board of Key Petroleum Limited believes the Remuneration Policy to be appropriate and
effective in its ability to attract and retain the best executives and directors to run and manage the Group.
The Board’s policy for determining the nature and amount of remuneration for board members and senior executives of the Group is as
follows:
The Remuneration Policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the
Board. All executives receive a base salary or an agreed fee (which is based on factors such as length of service and experience) and
superannuation. The Board reviews executive packages annually by reference to the Group’s performance, executive performance and
comparable information from industry sectors and other listed companies in similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the
highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.
Executives are also eligible to participate in the employee share and option arrangements.
7
The executives receive a superannuation guarantee contribution required by the government, which was 9.5% for the 2020 financial year, and
do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments
towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the Group. Based on each individual’s timesheet, costs are allocated
to exploration projects and treated in accordance with the accounting policy described at Note 1(p) or expensed where the time is not allocated
directly to a project. Options are valued using the Black-Scholes Option Pricing methodology.
The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and
responsibilities. The Board determines payments to the non-executive directors and reviews their remuneration annually, based on market
practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be
paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting (currently $500,000). Fees for
non-executive directors are not linked to the performance of the Group. However, to align directors’ interests with shareholder interests, the
Directors are encouraged to hold shares in the Company and are eligible to participate in the employee share option plan.
Performance based remuneration
The Group currently has performance-based remuneration components built into director and executive remuneration packages.
Kane Marshall was issued 4,000,000 performance rights for nil consideration following shareholder approval granted at a General Meeting
held on 6 August 2012. Half of the performance rights will vest if the volume weighted average price of the Company’s shares as quoted on
ASX increases by 100% from the share price reference point for a consecutive period of at least 30 business days during a calendar year. The
other half will vest if the volume weighted average price of the Company’s shares as quoted on ASX increases by 150% from the share price
reference point for a consecutive period of at least 30 business days during a calendar year.
In addition, Mr Marshall received 20,000,000 options for nil consideration following shareholder approval granted at the Annual General
Meeting on 22 November 2016. The options will vest where the average 30 consecutive day VWAP of the Company’s shares is equal or
greater than 1.5 cents.
Group performance, shareholder wealth and directors' and executives' remuneration
The remuneration policy has been tailored to increase the direct positive relationship between shareholders’ investment objectives and
directors’ and executives’ performance. The Company plans to facilitate this process by directors and executives participating in future option
issues to encourage the alignment of personal and shareholder interests. The Company believes this policy will be effective in increasing
shareholder wealth.
Use of remuneration consultants
The Group did not employ the services of any remuneration consultants during the financial year ended 30 June 2020.
Voting and comments made at the Company’s 2019 Annual General Meeting
The Company received 95.2% of “yes” votes on its remuneration report for the 2019 financial year. The Company did not receive any specific
feedback at the AGM or throughout the year on its remuneration practices.
Details of remuneration
Details of the remuneration of the directors and the key management personnel of the Group are set out in the following table.
The key management personnel of the Group include the directors as per page 4 above.
Given the size and nature of operations of the Group, there are no other employees who are required to have their remuneration disclosed in
accordance with the Corporations Act 2001.
8
Key management personnel of the Group
Short Term Benefits
Post-Employment
Benefits
Long-Term Benefits
Equity-Settled Share-
Based Payments
Salary
& Fees
Profit
Share &
Bonuses
Non-
Monetary
Other
Pension &
Super-
annuation
Other
Incentive
Plans
LSL
Shares/
Units
Options/
Rights
Total
$
$
$
$
$
$
$
$
$
$
$
Directors
Rex Turkington
2020
60,000
2019
60,000
Kane Marshall
2020
222,160
2019
235,431
Dennis Wilkins (1) 2020
32,000
2019
32,000
Min Yang(2)
2020
32,000
2019
32,000
Geoff Baker(2)
2020
32,000
2019
32,000
Total key
management
personnel
2020
378,160
2019
391,431
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,904
22,580
-
-
-
-
-
-
21,904
22,580
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,382)
10,700
-
-
-
-
-
-
(6,382)
10,700
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
60,000
7,911
245,593
7,911
276,622
-
32,000
751
32,751
-
-
-
-
32,000
32,000
32,000
32,000
7,911
401,593
7,911
432,622
(1)
(2)
In addition to Mr Wilkins’ remuneration as a director, a total of $21,787 (2019: $30,694) was paid to DW Corporate Pty Ltd, a business
of which Mr Wilkins is principal. DW Corporate Pty Ltd provided bookkeeping and accounting services to the Group during the year.
The amounts paid were at usual commercial rates with fees charged on an hourly basis.
In addition to Min Yang’s and Geoff Baker’s remuneration as directors, a total of $30,000 (2019: $36,00) was paid to ASF Capital Pty
Ltd, a business of which Min Yang and Geoff Baker are directors. ASF Capital Pty Ltd provides corporate advisory services to the
Group during the year. The amounts paid were at usual commercial rates.
Service agreements
The details of service agreements of the key management personnel of Key Petroleum Limited are as follows:
Rex Turkington, Non-Executive Chairman:
•
•
•
Annual consulting fee of $60,000 to be paid to Katarina Corporation Pty Ltd, a business of which Mr Turkington is principal;
Agreement commenced 14 January 2014 for a twelve month period and was since renewed for a further twelve months in each of the
following three years. Since January 2018 the contract is a rolling month by month agreement with the Company; and
The agreement may be terminated, without cause, by either party giving written notice.
Kane Marshall, Managing Director:
• Mr Marshall is a full-time employee of the Company with an annual salary of $175,000, plus statutory superannuation;
• Mr Marshall’s original employment agreement expired in April 2018 and has been renewed on the same terms for a further 2 years then
rolling on a monthly basis; and
•
The agreement may be terminated, without cause, by either party with three months’ written notice.
9
Min Yang, Non-Executive Director:
•
•
•
Annual consulting fee of $32,000 to be paid to Luxe Hill Ltd, a business of which Ms Yang is principal;
Agreement commenced 28 January 2014 for a twelve month period and was since renewed for a further twelve months in each of the
following three years. Since January 2018 the contract is a rolling month by month agreement with the Company; and
The agreement may be terminated, without cause, by either party giving written notice.
Geoff Baker, Non-Executive Director:
•
•
•
Annual consulting fee of $32,000 to be paid to Gold Star Industry Limited, a business of which Mr Baker is principal;
Agreement commenced 3 March 2015 for a twelve month period and was since renewed for a further twelve months in each of the
following two years. Since March 2018 the contract is a rolling month by month agreement with the Company; and
The agreement may be terminated, without cause, by either party giving written notice.
Dennis Wilkins – Non-Executive Director
•
•
•
Annual consulting fee of $32,000 to be paid to DW Corporate Pty Ltd, a business of which Mr Wilkins is principal;
The contract is a rolling month by month agreement with the Company; and
The agreement may be terminated, without cause, by either party giving written notice.
Share-based compensation
Options
Options are issued at no cost to key management personnel as part of their remuneration. The options are not issued based on performance
criteria but are issued to key management personnel of Key Petroleum Limited to increase goal congruence between key management
personnel and shareholders. The following options over ordinary shares of the Company were granted to or vesting with key management
personnel during the year:
Grant Date
Granted
Number
Vesting Date Expiry Date
Exercise
Price (cents)
Value per
option at grant
date (cents)
Exercised
Number % of Remuneration
Directors
Kane Marshall
22/11/2016
20,000,000
(1)
22/11/2020
1.5
0.4
N/A
2.9
(1) The options will vest where the average 30 consecutive day VWAP of the Company’s shares is equal or greater than 1.5 cents.
(2) There were no ordinary shares issued upon exercise of remuneration options to directors or other key management personnel of Key
Petroleum Limited during the year.
Performance Rights
Performance rights are issued to directors and executives as part of their remuneration. The Company does not have a formal policy in relation
to the key management personnel limiting their exposure to risk in relation to the securities, but the Board actively discourages key personnel
from obtaining mortgages in securities held in the Company.
The following performance rights were granted to or vesting with key management personnel during the year, there were no performance
rights forfeited during the year:
Grant Date
Granted
Number
Vested
Number
Date Vesting
and
Exercisable Expiry Date
Value per
right at
grant date
(cents) (1) % of Remuneration
Directors
Kane Marshall
Kane Marshall
06/08/2012 2,000,000
Nil
06/08/2012 2,000,000
Nil
(2)
(3)
N/A
N/A
3.6
3.6
-
-
(1) The value at grant date in accordance with AASB 2: Share Based Payments of performance rights granted during the year as part of
remuneration. The value is the closing share price on grant date.
(2) These rights vest upon the satisfaction of the following performance hurdle:
10
“When the volume weighted average price of the Company’s shares increases by 100% for a consecutive period of at least 30 business
days during each calendar year of the directors’ term.”
At the grant date, the Board determined that the probability of this performance condition being met was 60%.
(3) These rights vest upon the satisfaction of the following performance hurdle:
“When the volume weighted average price of the Company’s shares increases by 150% for a consecutive period of at least 30 business
days during each calendar year of the directors’ term.”
At the grant date, the Board determined that the probability of this performance condition being met was 50%.
Equity instruments held by key management personnel
Share holdings
The numbers of shares in the Company held during the financial year by each director of Key Petroleum Limited and other key management
personnel of the Group, including their personally related parties, and any nominally held, are set out below. There were no shares granted
during the reporting period as compensation.
2020
Directors of Key Petroleum Limited
Ordinary shares
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang (1)
Geoff Baker (1)
Balance at start of
the year
Received during the
year on the exercise
of options
Other changes
during the year
Balance at end of
the year
-
17,500,000
-
221,147,588
221,147,588
-
-
-
-
-
-
-
1,408,450
18,908,450
-
-
4,225,352
225,372,940
4,225,352
225,372,940
(1) Ms Yang and Mr Baker are both directors of ASF Group Limited which is the ultimate holding company of ASF Oil & Gas Holdings Pty
Ltd which holds shares in Key Petroleum Limited.
Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Key Petroleum Limited and
other key management personnel of the Group, including their personally related parties, are set out below:
2020
Balance at
start of the
year
Granted as
compensation
Exercised
Other
changes
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors of Key Petroleum Limited
Rex Turkington
-
Kane Marshall
20,000,000
Dennis Wilkins
Min Yang
Geoff Baker
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 20,000,000
-
-
-
-
-
-
-
-
-
-
-
-
20,000,000
-
-
-
11
Performance Right holdings
Kane Marshall was issued 4,000,000 Performance Rights for nil consideration on 6 August 2012 following shareholder approval granted at the
General Meeting held on that date. The performance rights were issued in two equal tranches that will vest on the respective satisfaction of the
following performance conditions:
(1) Performance rights A:
“When the volume weighted average price of the Company’s shares increases by 100% for a consecutive period of at least 30 business
days during each calendar year of the directors’ term.”
(2) Performance rights B:
“When the volume weighted average price of the Company’s shares increases by 150% for a consecutive period of at least 30 business
days during each calendar year of the directors’ term.”
Note: As a result of the retirement of Kane Marshall on 28 August 2020, all of the Performance Rights lapsed from that date.
Loans to key management personnel
There were no loans to key management personnel during the year.
Other transactions with key management personnel
The Company has a lease agreement for a vehicle relating to an associate of Mr Marshall. The value of the lease payments for the year was
$14,364 (2019: $14,364) and this total plus related FBT contribution was taken from Mr Marshall’s gross salary as a deduction for the year.
There are no other related party transactions during the year.
DW Corporate Pty Ltd, a business of which Mr Wilkins is principal, provided bookkeeping and accounting services to the Key Petroleum
Group during the year. The amounts paid of $21,787 (2019: $30,694) were on arm’s length commercial terms and are disclosed in the
remuneration report in conjunction with Mr Wilkin’s compensation. At 30 June 2020 there was $11,951 (2019: $1,412) owing to DW
Corporate Pty Ltd.
ASF Capital Ltd, a business of which Mr Baker and Ms Yang, provided corporate advisory services to the Key Petroleum Group during the
year. The amounts paid of $30,000 (2019: $36,000) were on arm’s length commercial terms.
End of audited Remuneration Report
12
DIRECTORS’ MEETINGS
During the year the Company held five meetings of directors. The attendance of directors at meetings of the board were:
Directors Meetings
Audit & Risk Committee Meetings1
Remuneration Committee1
Meetings
A
11
11
9
11
11
B
11
11
11
11
11
A
2
*
1
2
*
B
2
*
2
2
*
A
-
*
-
*
-
B
-
*
-
*
-
Rex Turkington
Kane Marshall
Dennis Wilkins
Min Yang
Geoff Baker
Notes
A – Number of meetings attended.
B – Number of meetings held during the time the director held office during the year.
* – Not a member of the Committee.
1 – On 10 March 2020 the Board of Directors determined that there were no efficiencies to be gained by continuing the Audit and Risk
Committee and Remuneration Committee. It was resolved to disband these Committees. Instead the functions of these Committees are
undertaken by the full Board. When the Board is considering matters within the ambit of the Audit and Risk Committee Charter and
Remuneration Committee Charter, it will be guided by and, to the extent practicable, act in accordance with, those Charters. At such time
when the Group is of sufficient size, consideration will be given to reforming these Committees.
SHARES UNDER OPTION
Unissued ordinary shares of Key Petroleum Limited under option at the date of this report are as follows:
Date options granted
Expiry date
Exercise price (cents)
Number of options
22 November 2016
30 November 2020
24 August 2018
24 August 2022
28 March 2019
27 March 2023
1.5
1.3
1.3
Total number of options outstanding at the date of this report
20,000,000
4,500,000
1,000,000
25,500,000
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, Key Petroleum Limited paid a premium of $30,436 to insure the directors and secretary of the Company.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers
in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in connection with such
proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper
use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company.
It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.
NON-AUDIT SERVICES
There were no non-audit services provided by the entity's auditor, Bentleys, or associated entities.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or
to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or any
part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act
2001.
13
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 15.
Signed in accordance with a resolution of the directors for Key Petroleum Limited.
Geoff Baker
Non-Executive Chairman
Perth, 29 September 2020
CORPORATE GOVERNANCE STATEMENT
The Company’s 2020 Corporate Governance Statement has been released as a separate document and is located on the Company’s website
at http://www.keypetroleum.com.au/corporate_governance.
14
To the Board of Directors
Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
As lead audit Partner for the audit of the financial statements of Key Petroleum Limited for
the financial year ended 30 June 2020, I declare that to the best of my knowledge and
belief, there have been no contraventions of:
−
−
the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
any applicable code of professional conduct in relation to the audit.
Yours Faithfully,
BENTLEYS
Chartered Accountants
MARK DELAURENTIS CA
Partner
Dated at Perth this 29th day of September 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2020
Notes
2020
$
2019
$
REVENUE FROM CONTINUING OPERATIONS
2
767,527
460,377
Share-based payments expense
22
(10,509)
EXPENDITURE
Depreciation expense
Salaries and employee benefits expense
Corporate expenditure
Administration costs
Contracting costs
Exploration costs not capitalised
Finance costs
Loss on disposal of subsidiaries
LOSS BEFORE INCOME TAX
INCOME TAX BENEFIT / (EXPENSE)
LOSS FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Items that have been reclassified to profit or loss
Exchange differences realised on disposal of foreign operations
Other comprehensive income for the year, net of tax
(82,793)
(30,490)
(143,057)
(195,278)
(133,586)
(34,899)
(411,291)
(489,009)
(81,820)
(39,666)
(10,727)
-
(161,259)
(223,098)
(38,284)
(5,968)
(62,729)
3
4
(145,922)
(780,637)
-
-
(145,922)
(780,637)
-
-
-
20,425
62,729
83,154
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO
MEMBERS OF KEY PETROLEUM LIMITED
(145,922)
(697,483)
Basic and diluted loss per share attributable to the members of Key Petroleum
Limited (cents per share)
21
(0.01)
(0.05)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the
Consolidated Financial Statements.
16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2020
Notes
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Plant and equipment
Capitalised exploration costs
Right of use Asset
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Lease Liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
5
6
7
8
9
17
10
17
11
17
11
2020
$
642,193
268,735
910,928
178,562
171,293
2019
$
446,895
1,508,545
1,955,440
178,562
197,092
4,502,264
3,673,214
33,856
-
4,885,975
4,048,868
5,796,903
6,004,308
439,102
26,369
338,256
803,727
4,305
1,269
5,574
699,337
-
1,382,750
2,082,087
-
433
433
809,301
2,082,520
4,987,602
3,921,788
12
42,515,302
41,314,075
13(a)
756,674
746,165
(38,284,374)
(38,138,452)
4,987,602
3,921,788
The above Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Consolidated Financial Statements.
17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2020
Issued Capital
Share-Based
Payments
Reserve
Foreign Currency
Translation
Reserve
Accumulated
Losses
$
$
$
$
Total
$
BALANCE AT 1 JULY 2018
40,399,836
707,881
(83,154)
(37,357,815)
3,666,748
Loss for the year
Exchange differences on translation of
foreign operations
Exchange differences realised on disposal
of foreign operations
TOTAL COMPREHENSIVE INCOME
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
-
-
-
-
Shares issued during the year
Share issue transaction costs
1,010,519
(96,280)
-
-
-
-
-
-
Share-based payments
-
38,284
BALANCE AT 30 JUNE 2019
41,314,075
746,165
Loss for the year
Exchange differences on translation of
foreign operations
Exchange differences realised on disposal
of foreign operations
TOTAL COMPREHENSIVE LOSS FOR THE
YEAR
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS
-
-
-
-
Shares issued during the year
Share issue transaction costs
1,297,010
(95,783)
-
-
-
-
-
-
Share-based payments
-
10,509
BALANCE AT 30 JUNE 2020
42,515,302
756,674
-
(780,637)
(780,637)
20,425
62,729
-
-
20,425
62,729
83,154
(780,637)
(697,483)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,010,519
(96,280)
38,284
(38,138,452)
3,921,788
(145,922)
(145,922)
-
-
-
-
(145,922)
(145,922)
-
-
-
1,297,010
(95,783)
10,509
(38,284,374)
4,987,602
The above Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements.
18
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 JUNE 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Government Grants and tax incentives
Finance costs paid
Expenditure on petroleum interests
Notes
2020
$
2019
$
197,322
74,806
(767,322)
(686,019)
921
68,000
8,620
-
(10,727)
(5,909)
(535,360)
(1,323,126)
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
5(a)
(1,047,166)
(1,931,628)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
Payments for guarantees
Proceeds on farmout of Permit
-
-
(435)
(157,305)
150,000
-
Receipt of cash on acquisition of petroleum interests
9
-
380,000
Payments for rehabilitation expenses on petroleum interest
(1,382,750)
(408,893)
Reimbursement of rehabilitation expenses
NET CASH INFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
1,334,164
101,414
264,041
77,408
Proceeds from issues of ordinary shares and options
1,297,010
1,010,519
Payments of share issue transaction costs
Principal elements of Lease Payment
(95,783)
(60,177)
(96,280)
-
NET CASH INFLOW FROM FINANCING ACTIVITIES
1,141,050
914,239
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the financial year
195,298
446,895
(939,981)
1,386,876
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
5
642,193
446,895
The above Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Consolidated Financial Statements.
19
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Key Petroleum
Limited and its subsidiaries. The financial statements are presented in Australian currency. Key Petroleum Limited is a company limited by
shares, domiciled and incorporated in Australia. The financial statements were authorised for issue by the directors on 29 September 2020.
The directors have the power to amend and reissue the financial statements.
(a) Basis of preparation
These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board and the Corporations Act 2001. Key Petroleum Limited is a for-profit entity for the purpose of
preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the Key Petroleum Limited Group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the Group
The Group has adopted AASB 16 Leases from 1 July 2019 which has resulted in changes in the classification, measurement and recognition
of leases. The new standard requires recognition of a right-of-use asset (the leased item) and a financial liability (lease payments) and removes
the former distinction between ‘operating’ and ‘finance’ leases. The exceptions are short-term leases and leases of low value assets.
The Group has adopted AASB 16 using the modified retrospective approach under which the reclassifications and adjustments arising from
the new leasing rules are recognised in the opening statement of financial position on 1 July 2019. There is no initial impact on accumulated
losses under this approach and comparatives have not been restated.
From 1 July 2019, where the Group is lessee, the Group recognises a right-of-use asset and a corresponding liability at the date at which the
lease asset is available for use by the Group. Each lease payment is allocated between the liability and the finance cost. The finance cost is
charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each
period. The rightof-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
•
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
•
Fixed Payments (including in-substance fixed payments), less any lease incentives receivable
• Variable lease payments that are based on an index or a rate;
• Amounts expected to be payable the lessee under residual value guarantees;
•
•
The exercise price of a purchase option if the lessee is reasonable certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
The Group’s current lease agreements do not contain any extension options. Right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before commencement date less any lease incentives received, and any initial direct
costs.
Where the terms of a lease require the Group to restore the underlying asset, or the Group has an obligation to dismantle and remove a leased
asset, a provision is recognised and measured in accordance with AASB 137. To the extent that the costs relate to a right-of-use asset, the costs
are included in the related right-of-use asset.
Where leases have a term of less than 12 months or relate to low value assets the Group may apply exemptions in AASB 16 to not capitalise
any such leases and instead recognise the lease payments on a straight-line basis as an expense in profit or loss.
Impact on adoption of AASB 16 On adoption of AASB 16 the Group recognised lease liabilities in relation to leases which had previously
been classified as operating leases under the principle of AASB 117. These liabilities were measured at the present value of the remaining lease
payments, discounted using the Group’s incremental borrowing rate as of 1 July 2019, being 10%. On initial application the associated right-
of-use assets were measured at the amount equal to the lease liability, adjusted for prepaid lease payments recognised in the statement of
financial position as at 30 June 2019. In the statement of cash flows the Group has recognised cash payments for the principal portion of the
lease liability within financing activities and cash payments for the interest portion of the lease liability as interest paid within operating
activities. The adoption of AASB 16 resulted in the recognition of a right-of-use assets of $90,850 and lease liabilities of $86,018 in respect of
the office lease. There was no impact on accumulated losses at 1 July 2019.
20
Practical expedients applied
•
In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard: • the Group
has elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered
before the transition date the Group relied on its assessment made applying AASB 117 Leases and Interpretation 4 Determining
whether an Arrangement contains a Lease; and
•
reliance on previous assessments on whether leases are onerous.
Reconciliation of operating lease commitments to lease liability Below is a reconciliation of total operating lease commitments as at 30 June
2019, as disclosed in the annual financial statements for the year ended 30 June 2019, and the lease liability recognised on 1 July 2019:
Operating lease commitments disclosed as at 30 June 2019
Adjustment for prepayment at 30 June 2019 and other variances
Discounted using the lessee’s incremental borrowing rate at the date of initial
application and lease liability recognised as at 1 July 2019
$
101,133
(7,421)
93,712
86,018
(iii) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the amount of share based payments
expense, which have been measured at fair value.
(iv) Going concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the
realisation of assets and the settlement of liabilities in the ordinary course of business.
The Group incurred a loss for the year of $145,922 (2019: $780,637) and net cash outflows from operating activities of $1,006,779 (2019:
$1,931,628).
The directors have prepared an estimated cash flow forecast for the period to September 2021 to determine if the Group will require additional
funding during the next 15 month period. Where this cash flow forecast includes the likelihood that additional amounts will be needed and
these funds have not yet been secured, it creates material uncertainty as to whether the Group will continue to operate in the manner it has
planned over the next 15 months.
Where the cash flow forecast includes these uncertainties, the directors are required to make an assessment of whether it is reasonable to assume
that the Group will be able to continue its normal operations. The directors are satisfied that the going concern basis of preparation is appropriate
based on the following factors and judgements:
•
•
•
•
The Group has access to cash reserves of $642,193 as at 30 June 2020 (30 June 2019: $446,895);
The Group has the ability to adjust its exploration expenditure subject to results of its exploration activities and has a history of attracting
Farm-in partners to assist in funding exploration commitments;
The Group has raised $1,297,010 during the year via the issue of shares; and
The Directors anticipate the support of the Group’s major shareholders to continue with the advancement of the Group’s assets.
Should the Directors not achieve the matters as set out above, there is a material uncertainty whether the Group will continue as a going concern
and it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts to those
stated in the annual report. The annual report does not include any adjustments relating to the recoverability and classification of asset carrying
amounts or to the amount and classification of liabilities that might result should the Group be unable to continue as a going concern and meet
its debts as and when they fall due.
(b) Principles of consolidation
(i)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to
direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-
consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group.
21
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of the impairment of the transferred asset. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of profit or loss and other
comprehensive income, statement of changes in equity and statement of financial position respectively.
(ii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the
Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests
to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any
consideration paid or received is recognised in a separate reserve within equity attributable to owners of Key Petroleum Limited.
When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value with the change in carrying amount
recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest
as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in
respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly controlled entity or associate is reduced but joint control or significant influence is retained, only a
proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
(iii)
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations
for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a Group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint
operation:
•
•
•
•
•
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output arising from the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the AASBs
applicable to the particular assets, liabilities, revenues and expenses.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a sale or contribution of assets), the
Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the
transactions are recognised in the Group's consolidated financial statements only to the extent of other parties' interests in the joint operation.
When a Group entity transacts with a joint operation in which a Group entity is a joint operator (such as a purchase of assets), the Group does
not recognise its share of the gains and losses until it resells those assets to a third party.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified
as the full Board of Directors.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Key
Petroleum Limited's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. They are deferred in equity if they are
attributable to part of the net investment in a foreign operation.
Translation differences on financial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation
differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or
loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-
sale financial assets are included in the fair value reserve in equity.
22
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of
financial position;
income and expenses for each statement of comprehensive income are translated at average exchange rates (unless that is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated
at the dates of the transactions); and
•
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other
financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is
sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as
part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and
translated at the closing rate.
(e) Revenue recognition
Sales revenue from providing services to external parties is recognised in the accounting period in which the services are rendered. For fixed
price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services
to be provided because the customer receives and uses the benefits simultaneously. This is based on the actual labour hours spent relative to
the total expected labour hours. Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the
financial assets.
(f)
Income tax
The Company formed a tax consolidated Group on 1 July 2016. The effect of the transition from single taxable entities to a tax consolidated
group is the re-setting of the tax bases for assets within the group and an adjustment to the available carry forward losses under the available
fraction calculation.
The head entity, Key Petroleum Limited, and the controlled entities in the tax consolidated group account for their own current and deferred
taxes and are measured on a stand-alone taxpayer basis. The Group currently does not have a tax sharing or tax funding arrangement.
The income tax expense or revenue for the year is the tax payable on the current year’s taxable income based on the applicable income tax rate
for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in
the countries where the Company’s subsidiaries and associated operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially
enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability
is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
(g) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of
the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term
payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and
equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.
23
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line
basis over the period of the lease.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets
are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
•
•
•
•
•
fair values of the assets transferred;
liabilities incurred to the former owners of the acquired businesses;
equity interests issued by the Group;
fair value of any asset or liability resulting from a contingent consideration arrangement; and
fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-
by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
•
•
•
consideration transferred;
amount of any non-controlling interest in the acquired entity; and
acquisition-date fair value of any previous equity interest in the acquired entity;
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the
date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which similar borrowing could be obtained
from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognised in profit or
loss.
(i)
Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired. Exploration and Evaluation Expenditure is assessed for
impairment indicators under AASB 6 paragraph 20 and where there are indicators of impairment the Company will test for impairment. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or
groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal
of the impairment at the end of each reporting period.
(j) Cash and cash equivalents
For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the statement of financial position.
(k)
Investments and other financial assets
(i) Classification
From 1 July 2019 the Company classifies its financial assets in the following measurement categories:
•
•
Those to be measured subsequently at fair value (either through OCI or through profit or loss); and
Those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
24
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that
are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account
for the equity investment at fair value through other comprehensive income (FVOCI).
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Company commits to purchase or sell
the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred
and the Company has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of
principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
•
•
•
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income or
expenses. Impairment losses are presented as a separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in
profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from
equity to profit or loss and recognised in other income or expenses. Interest income from these financial assets is included in finance
income using the effective interest rate method. Foreign exchange gains and losses are presented in other income or expenses and
impairment losses are presented as a separate line item in the statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that
is subsequently measured at FVPL is recognised in profit or loss and presented net within other income or expenses in the period in
which it arises.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair value
gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the
Company’s right to receive payment is established.
Changes in the fair value of financial assets at FVPL are recognised in other income or expenses in the statement of profit or loss as applicable.
Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes
in fair value.
(iv)
Impairment
The Company assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised cost and
FVOCI. The impairment methodology depends on whether there has been a significant increase in credit risk.
Financial assets - reclassification
The Group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no
longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out
of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near
term. In addition, the Group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-
for-trading or available-for-sale categories if the Group has the intention and ability to hold these financial assets for the foreseeable future or
until maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no
reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets
reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates
of cash flows adjust effective interest rates prospectively.
25
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the
asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or
loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed to the
statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the
statement of comprehensive income as gains and losses from investment securities.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transactions costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
fair value through profit or loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses
arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of
comprehensive income within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair
value through profit or loss is recognised in the statement of comprehensive income as part of revenue from continuing operations when the
Group’s right to receive payments is established.
Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between
translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The
translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are
recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in
equity.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is
impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of
equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered
an indicator that the assets are impaired.
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity
investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after
the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment
loss is recognised in profit or loss.
(ii) Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the difference between
the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is
removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related
to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.
(l) Plant and equipment
All plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount
of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the
statement of comprehensive income during the reporting period in which they are incurred.
26
Depreciation of plant and equipment is calculated using the reducing balance method to allocate their cost or revalued amounts, net of their
residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter
lease term. The rates vary between 20% and 40% per annum.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount (Note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of
comprehensive income. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those
assets to retained earnings.
(m) Exploration and evaluation costs
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in
the year in which they are incurred where the following conditions are satisfied.
(i)
the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(a)
(b)
the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the
area of interest, or alternatively, by its sale; or
exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in
relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, salaries of exploration
personnel, exploratory drilling and sampling and associated activities and depreciation of assets used in exploration and evaluation activities.
General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to
operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration
and evaluation asset may exceed its recoverable amount. The policy on impairment can be found at Note 1(i). The recoverable amount of the
exploration and evaluation asset is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset
in previous years.
When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written
off in the financial year the decision is made.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. They
are recognised initially at fair value and subsequently at amortised cost. The amounts are unsecured and are paid on normal commercial terms.
(o) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting
date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to
be paid when the liabilities are settled.
(ii) Other long-term employee benefit obligations
The group also has liabilities for long service leave that are not expected to be settled wholly within 12 months after the end of the period in
which the employees render the related service. These obligations are therefore measured as the present value of expected future payments to
be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration
is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as
closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for
at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Share-based payments
The Group provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
27
The fair value is determined by an internal valuation using a Black-Scholes Option Pricing model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the
vesting period has expired and (ii) the number of options that, in the opinion of the directors of the Company, will ultimately vest. This opinion
is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions
being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award
on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award.
(p) Provisions and asset retirement obligation
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an
outflow of economic benefits will result, and that outflow can be reliably measured. When this provision gives access to future economic
benefits, an asset is recognised and then subsequently depreciated in line with the life of the underlying producing asset, otherwise the costs
are charged to the income statement. The unwinding of the discount on the provision is included in the profit or loss and other comprehensive
income within finance costs. Any changes to estimated costs or discount rates are dealt with prospectively.
(q)
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration.
(r) Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
(b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax
effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed
to have been issued for no consideration in relation to dilutive potential ordinary shares.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable
to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(t) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial
year.
(u) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2020 reporting periods and have
not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. New
standards and interpretations not mentioned are considered unlikely to impact on the financial reporting of the Group.
(v) Critical accounting judgements, estimates and assumptions
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to exercise
its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial statements are:
Exploration and evaluation costs
Exploration and evaluation costs are accumulated in respect of each identifiable area of interest. The write-off or carrying forward of exploration
expenditure is based on a periodic assessment of the viability of an area of interest and/or the existence of economically recoverable reserves.
28
This assessment is based on pre-determined impairment indicators, taking into account the requirements of the accounting standard, and with
the information available at the time of preparing this report. Information may come to light in subsequent periods which requires the asset to
be impaired or written down for which the directors are unable to predict the outcome. When an area of interest is abandoned or the directors
decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial year the decision is made.
Environmental Issues
Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation, and the
directors understanding thereof. At the current stage of the Group’s development and its current environmental impact the directors believe
such treatment is reasonable and appropriate.
Taxation
Deferred tax assets are recognised for deductible temporary differences and taxation losses when the directors and management consider that
it is probable that sufficient future tax profits will be available to utilise those temporary differences and losses. Significant judgement is
required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable
profits over the future period together with future tax planning strategies and the impact of the current income taxation legislation. Where there
are significant variables relating to generating taxable profits in the future and there is limited operating history, the Group will disclose the
unrecognised deferred taxes.
Share-based payments
Share-based payment transactions, in the form of options to acquire ordinary shares, are valued using the Black-Scholes option pricing model.
This model uses assumptions and estimates as inputs based on historical information available at the time the valuation was undertaken. This
historical information may not be indicative of the future result.
Provisions for rehabilitation
A provision for restoration and rehabilitation is recognised when there is a present obligation as a result of development activities undertaken,
it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured
reliably. The estimated future obligations include the costs of abandoning sites, removing facilities and restoring the affected areas.
The provision for future restoration costs is the best estimate of the present value (including an appropriate discount rate relevant to the time
value of money plus any risk premium associated with the liability) of the expenditure required to settle the restoration obligation at the
reporting date. Future restoration costs are reviewed annually and any changes in the estimate are reflected in the present value of the restoration
provision.
The initial estimate of the restoration and rehabilitation provision is capitalised into the cost of the related asset and amortised on the same
basis as the related asset, unless the present obligation arises from the production of inventory in the period, in which case the amount is
included in the cost of production for the period. Changes in the estimate of the provision for restoration and rehabilitation are treated in the
same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost rather than being capitalised
into the cost of the related asset.
29
30 JUNE 2020
2.
REVENUE AND OTHER INCOME
From continuing operations
Other revenue
Interest from financial institutions
Management fees
Fuel tax credits
Recharge Income
Gain on acquisition of permit
Consulting services
Cashflow boost
Other Income
3.
EXPENSES
Loss before income tax includes the following specific expenses:
Directors’ fees
Superannuation expense
2020
$
2019
$
921
32,092
5,750
481,094
-
133,286
89,500
24,884
8,620
39,952
9,219
-
380,000
13,650
-
8,936
767,527
460,377
156,000
52,306
156,000
51,895
30
30 JUNE 2020
4.
INCOME TAX
(a)
Income tax expense
Current tax
Deferred tax
2020
$
2019
$
-
-
-
-
-
-
(b) Numerical reconciliation of income tax expense to prima facie tax
payable
Loss before income tax expense
(145,922)
(780,637)
Prima facie tax (benefit)/expense at the Australian tax rate of 27.5% (2019:
27.5%)
(40,129)
(214,675)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Share based payments
COVID-19 Cash flow BOOST
Loss on disposal of subsidiaries
Other
2,890
(17,188)
-
416
10,528
-
17,250
213
(54,010)
(186,684)
Movements in unrecognised temporary differences
(196,669)
(423,470)
Tax effect of current year tax losses for which no deferred tax asset has been
recognised
Under/Over
Income tax expense
(c) Deferred tax assets not brought to account
Capital raising costs
Provision and accruals
Tax losses
Total
277,020
(26,341)
-
49,890
110,680
610,154
-
-
43,530
39,841
2,279,423
2,143,668
2,439,993
2,227,039
31
30 JUNE 2019
4.
INCOME TAX (cont’d)
(d) Deferred tax liabilities
Right of Use Asset
Capitalised exploration and evaluation costs
Total
(e) Offset provisions
Deferred tax liabilities
2019
$
2018
$
827
845,135
845,962
-
614,027
614,027
(845,962)
(614,027)
Deferred tax assets (portion off-set deferred tax liabilities)
845,962
614,027
Unused tax losses for which no deferred tax asset has been recognised
-
-
Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward have not been brought to account at 30 June
2019 because the directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time. These
benefits will only be obtained if:
(i)
the Group derives future assessable income of nature and of an amount sufficient to enable the benefits to be utilised;
(ii)
the Group continues to comply with the conditions for deductibility imposed by law; and
(iii) no changes in income tax legislation adversely affect the Group in utilising the benefits.
5.
CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short-term deposits
627,193
15,000
431,895
15,000
Cash and cash equivalents as shown in the statement of financial position and
the statement of cash flows
642,193
446,895
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the
Group and earn interest at the respective short-term deposit rates.
Credit risk
A-1+
642,193
446,895
The equivalent S&P rating of the financial assets represent that rating of the counterpart with whom the financial asset is held rather than the
rating of the financial asset itself.
32
30 JUNE 2020
2020
$
2019
$
5.
CURRENT ASSETS – CASH AND CASH EQUIVALENTS (cont’d)
(a) Reconciliation of net loss after income tax to net cash outflow from
operating activities
Net loss for the year
Non-cash items
Depreciation of non-current assets
Share-based payments expense
Gain on acquisition of permit
Loss on sale of subsidiary
Net exchange differences
Change in operating assets and liabilities
(145,922)
(780,637)
82,793
10,509
-
-
-
30,490
38,284
(380,000)
62,729
20,425
(increase)/Decrease in trade and other receivables
(38,747)
1,640
(Increase) in petroleum permits and capitalised exploration costs
(679,050)
(1,276,688)
Increase/(decrease) in trade and other payables
Increase in provisions
(277,586)
837
336,236
15,893
Net cash outflow from operating activities
(1,047,166)
(1,931,628)
6. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
L7 restoration reimbursement receivable
Other receivables
Refer to note 9 for further information on the L7 restoration reimbursement receivable.
156,114
112,621
268,735
1,481,352
27,193
1,508,545
33
30 JUNE 2020
6.
CURRENT ASSETS – TRADE AND OTHER RECEIVABLES (cont’d)
Credit Risk – Trade and Other Receivables
The Group has no significant concentration of credit risk with respect to any single counter party or group of counterparties other than those
receivables specifically provided for and mentioned within note 24. The class of assets described as ‘trade and other receivables’ is considered
to be the main source of credit risk related to the Group.
The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided for
thereon. Amounts are considered to be ‘past due’ when the debt has not been settled, with the terms and conditions agreed between the Group
and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the
debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high quality.
The table below outlines the amounts due, past due and not impaired.
Gross Amount
Past due and
impaired
Past due but not impaired
(days overdue)
Within initial trade
terms
$
$
< 30
$
31 - 60
61 - 90
$
$
> 90
$
$
2020
L7 restoration
reimbursement receivable
Other receivables
Total
2019
156,114
112,621
268,735
L7 restoration
reimbursement receivable
1,481,352
Other receivables
27,193
Total
1,508,545
7.
NON-CURRENT RECEIVABLES
Bank guarantees
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
156,114
112,621
268,735
1,481,352
27,193
1,508,545
2020
$
178,562
178,562
2019
$
178,562
178,562
The guarantee is held by the Group’s financial institution in cash. The credit rating has been disclosed above in note 5.
34
30 JUNE 2020
8. PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated depreciation
Net book amount
Reconciliation of movements in plant and equipment
Opening net book amount
Additions
Depreciation charge
Closing net book amount
9. CAPITALISED EXPLORATION COSTS
2020
$
2019
$
416,866
416,866
(245,573)
(219,774)
171,293
197,092
197,092
227,148
-
434
(25,799)
(30,490)
171,293
197,092
Exploration, evaluation and development costs carried forward in respect of
areas of interest
4,502,264
3,673,214
Reconciliation - Pre-production
Carrying amount at the beginning of the year
3,673,214
2,396,526
Additions to exploration and evaluation costs
979,050
1,276,688
Disposals during the year
(150,000)
-
Carrying amount at the end of the year
4,502,264
3,673,214
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and
commercial exploitation or sale of the respective petroleum interests.
On 13 July 2019 the Company, through its wholly owned subsidiary Key Cooper Basin Pty Ltd entered into a Farmin Agreement with
Pancontinental Oil and Gas NL (“Pancon”), Pancon will acquire from Key:
•
an undivided 20% participating interest in ATP 920 (together with an option to acquire an additional undivided 15% participating interest
in ATP 920); and
•
an undivided 25% participating interest in the Ace Area (collectively the “Farmin Interest”).
In consideration of the assignment of the Farmin Interest, Pancon will undertake the following obligations (collectively Farmin Obligations):
•
•
Pay to Key, $150,000 on the execution of the terms sheet to cover costs in relation to seismic reprocessing in respect of the Ace Area
and the area of ATP 920 as well as other permitting costs.
fund 26.67 % of the total costs and expenses of drilling a to be selected, exploration well to target depth including plugging and
abandoning the well (Dry Hole Costs) but excluding success case costs associated with testing and completing the well, with such well
costs to be capped at gross $3,000,000 (“on a 100% basis”).
The deal has been completed during the year.
35
30 JUNE 2020
9.
CAPITALISED EXPLORATION COSTS (cont’d)
Joint operations
2020
$
2019
$
The Group accounts for the assets, liabilities, revenues and expenses relating to its interests in Joint Operations in accordance with the
accounting policy of the Group (refer note 1(b)(iii)). The Group has the following interests in Joint Operations:
30 JUNE 2020
EP 437
ATP 783/920/924
WA-481-P
L7
2020
%
86.94
100.00
40.00
50.00
2019
%
86.94
100.00
40.00
50.00
All joint operations do not have any profit or loss items as the costs are capitalised to exploration assets. The amounts below represent the
Group’s interests in each joint operation.
EP 437
Balance sheet
CURRENT ASSETS
Cash and cash equivalents
Receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Exploration assets
TOTAL NON-CURRENT ASSETS
CURRENT LIABILITIES
Trade and other payables
TOTAL NON-CURRENT LIABILITIES
Commitments and contingencies
2020
$
2019
$
22
-
22
15,887
-
15,887
1,614,180
1,474,703
1,614,180
1,474,703
19,635
19,635
17,170
17,170
There are no capital commitments or contingencies as at 30 June 2020 and 30 June 2019 for the Joint Operations outside the work program
commitments listed as part of note 17 below.
36
30 JUNE 2020
10.
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
11. PROVISIONS
Current
Restoration provision (L7)
Long service leave
Non-Current
Long service leave
Total Provisions
Reconciliation – provision for restoration
Opening balance
Additions – exploration (a)
Restoration expenses incurred
Closing balance
2020
$
166,569
272,533
439,102
2019
$
267,927
431,410
699,337
300,000
1,336,500
38,256
46,250
338,256
1,382,750
1,269
433
339,525
1,383,183
1,336,500
-
300,000
1,718,016
(1,336,500)
(381,516)
300,000
1,336,500
(a) The addition in the restoration provision during the current year relates to the further rehabilitation work required on the Production
Licence L7.
Reconciliation – provision for long service leave
Opening balance
Additional provision for the year
Closing balance
46,683
(7,158)
39,525
30,790
15,893
46,683
37
30 JUNE 2020
12.
ISSUED CAPITAL
(a) Share capital
(b)
Number of shares
$
Number of shares
$
2020
2019
Ordinary shares fully paid
1,967,928,125
42,515,302
1,549,462,207
41,314,075
Total issued capital
1,967,928,125
42,515,302
1,549,462,207
41,314,075
(b) Movements in ordinary share capital
Beginning of the financial year
1,549,462,207
41,314,075
1,347,358,441
40,399,836
− Share placements
418,465,918
1,297,010
202,103,766
1,010,519
− Share issue transaction costs
-
(95,783)
-
(96,280)
End of the financial year
1,967,928,125
42,515,302
1,549,462,207
41,314,075
(c) Movements in options on issue
(d)
Beginning of the financial year
Issued during the year:
− Exercisable at 1.3 cents, on or before 24 August 2022
− Exercisable at 1.3 cents, on or before 27 March 2023
Options expired during the year:
− On 9 March 2019, exercisable at 1.287 cents
Number of options
2020
2019
25,500,000
21,000,000
-
-
-
4,500,000
1,000,000
(1,000,000)
End of the financial year
25,500,000
25,500,000
(d) Movements in performance rights on issue
Beginning of the financial year
End of the financial year
Number of performance rights
2020
2019
4,000,000
4,000,000
4,000,000
4,000,000
38
30 JUNE 2020
12. ISSUED CAPITAL (continued)
(e) Ordinary shares
2020
$
2019
$
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of
and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each
share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(f) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to
provide returns for shareholders and benefits for other stakeholders.
Due to the natures of the Group’s activities, being petroleum exploration, the Group does not have the access to credit facilities, with the
primary source of funding being equity raisings. Therefore, the focus of the Group’s capital risk management is the current working capital
position against the requirements of the Group to meet exploration programs and corporate overheads. The Group’s strategy is to ensure
appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required.
Refer to note 1 for management plans to remain a going concern. The working capital position of the Group as 30 June 2020 and 30 June 2019
are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Provisions - current
Lease liabilities
Working capital position
13. RESERVES
(a) Reserves
Foreign currency translation reserve
Share-based payments reserve
2020
$
642,193
268,735
2019
$
446,895
1,508,545
(439,102)
(699,337)
(338,256)
(1,382,750)
(26,369)
-
107,201
(126,647)
-
756,674
756,674
-
746,165
746,165
39
30 JUNE 2020
13. RESERVES (cont’d)
(b) Nature and purpose of reserves
(i) Foreign currency translation reserve
2020
$
2019
$
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income as described in Note
1(d) and accumulated within a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
(ii) Foreign currency translation reserve
The share-based payments reserve is used to recognise the fair value of options issued.
14. DIVIDENDS
No dividends were paid during the financial year. No recommendation for payment of dividends has been made.
15. REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-
related audit firms:
Audit services
Bentleys – audit and review of financial reports
Total remuneration for audit services
25,000
25,000
21,539
21,539
16. CONTINGENCIES
There are no material contingent liabilities or contingent assets of the Group at the reporting date.
17. COMMITMENTS
(a) Exploration commitments
The Company has certain commitments to meet minimum expenditure requirements on the mineral exploration assets it has an interest in.
Outstanding exploration commitments are as follows:
Within one year
3,524,840
3,992,600
Later than one year but not later than five years
12,084,040
12,084,040
15,608,880
16,076,640
40
30 JUNE 2020
17. COMMITMENTS (cont’d)
(b) Leased Assets and Liabilities
Leased Assets
Right-of-use assets
Accumulated Depreciation of Right of Use Asset
Carrying value of right-of-use-asset
Lease Liabilities
Current Lease Liabilities
Non-Current Lease Liabilities
Total Lease Liabilities
2020
$
2019
$
90,850
(56,994)
33,856
26,369
4,305
30,674
-
-
-
-
-
-
41
30 JUNE 2020
2020
$
2019
$
18. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Key Petroleum Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in note 19.
(c) Key management personnel compensation
Short-term benefits
Post-employment benefits
Long-term benefits
Share-based payments
378,160
21,904
(6,382)
7,911
391,431
22,580
10,700
7,911
401,593
432,622
Detailed remuneration disclosures are provided in the remuneration report within the Directors’ Report.
(d) Transactions and balances with other related parties
Transactions with key management personnel are disclosed below:
•
The Company has a lease agreement for a vehicle relating to an associate of Mr Marshall. The value of the lease payments for the
year was $14,364 (2019: $14,364) and this total plus related FBT contribution was taken from Mr Marshall’s gross salary as a
deduction for the year. There are no other related party transactions during the year.
• DW Corporate Pty Ltd, a business of which Mr Wilkins is principal, provided bookkeeping and accounting services to the Key
Petroleum Group during the year. The amounts paid of $21,787 (2019: $30,694) were on arm’s length commercial terms and are
disclosed in the remuneration report in conjunction with Mr Wilkins’ compensation. At 30 June 2020 there was $11,951 (2019:
$1,412) owing to DW Corporate Pty Ltd.
• ASF Capital Ltd, a business of which Mr Baker and Ms Yang, provided corporate advisory services to the Key Petroleum Group
during the year. The amounts paid of $30,000 (2019: $36,000) were on arm’s length commercial terms.
42
30 JUNE 2020
19. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(b):
Name
Country of Incorporation
Class of Shares
Equity Holding*
Key Petroleum (Australia) Pty Ltd
Key Cooper Basin Pty Ltd
Key Petroleum Services Pty Ltd
Key Midwest Pty Ltd
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
2020
%
100
100
100
100
2019
%
100
100
100
100
20. EVENTS OCCURRING AFTER THE REPORTING DATE
Subsequent to the end of the financial year the following items occurred:
•
•
The Managing Director, Kane Marshall, retired from the board with effect from 28 August 2020 and Rex Turkington retired as Chairman
and Non-executive of the Company with effect from 31 August 2020. Geoff Baker was appointed as Chairman of the board on 31
August 2020. Ric Jason, who was the Company’s Exploration Manager, was appointed as Interim Chief Executive Officer with effect
from 28 August 2020.
On 8 September 2020, Key entered into a term sheet with Pilot Energy Limited whereby Key will sell its 40% interest in the WA-481-
P Permit to Pilot. In consideration for the transfer of its interest, Pilot will issue to Key (or its nominee) in two tranches 21 million shares
in Pilot that will be fully paid ordinary listed shares. The parties will terminate the Joint Venture Agreement between each other in
relation to the WA-481-P Permit. The 21 million shares in Pilot will be issued to Key (or its nominee), subject to approval by Pilot’s
shareholders.
Other than the above, there was no other events occurring after the reporting date.
43
30 JUNE 2020
21. LOSS PER SHARE
(a) Reconciliation of earnings used in calculating loss per share
Loss attributable to the owners of the Company used in calculating basic and
diluted loss per share:
2020
$
2019
$
(145,922)
(780,637)
(145,922)
(780,637)
Number of shares
Number of shares
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
1,718,902,416
1,419,955,027
(c
Information on the classification of options
As the Group made a loss for the year ended 30 June 2020, the options on issue were considered anti-dilutive and were not included in the
calculation of diluted earnings per share. The options currently on issue could potentially dilute basic earnings per share in the future.
22. SHARE-BASED PAYMENTS
(a) Employees and contractors’ options
The Group provides benefits to employees (including Directors) and contractors of the Group in the form of share-based payment transactions,
whereby options to acquire ordinary shares are issued as an incentive to improve employee and shareholder goal congruence. The exercise
prices of the options granted and on issue at 30 June 2020 range from 1.3 to 1.5 cents per option, with expiry dates ranging from 30 November
2020 to 27 March 2023.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the Company with
full dividend and voting rights.
Set out below are summaries of the options granted:
2020
2019
Number of
options
Weighted
average exercise
price cents
Number of
options
Weighted
average exercise
price cents
Outstanding at the beginning of the year
25,500,000
1.46
21,000,000
Granted
Forfeited/cancelled
Exercised
Expired / lapsed
Outstanding at year-end
Exercisable at year-end
-
-
-
-
-
-
-
-
5,500,000
-
-
1.49
1.30
-
-
(1,000,000)
(1.29)
25,500,000
1.46
25,500,000
25,500,000
1.46
25,500,000
1.46
1.46
The weighted average remaining contractual life of share options outstanding at the end of the financial year was 0.8 years (2019: 1.8), and
the exercise prices range from 1.3 cents to 1.5 cents.
44
30 JUNE 2020
The weighted average fair value of options granted during the year was 0.6 cents. There were no options granted during the 2020 financial
year. The prices were calculated using a Black Scholes Option Pricing model applying the following inputs:
Weighted average exercise price (cents)
Weighted average life of the options
Weighted average underlying share price (cents)
Weighted average expected volatility
Weighted average risk free rate
2020
1.3
4.0
0.8
137.3%
1.9%
Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future trends,
which may not eventuate.
The life of the options is based on historical exercise patterns, which may not eventuate in the future.
(b) Employees and contractors performance rights
The Group provides benefits to employees (including directors) and contractors of the Group in the form of share-based payment transactions,
whereby performance rights over ordinary shares are issued as an incentive to improve employee and shareholder goal congruence. The
performance rights granted to directors and on issue at 30 June 2020 have no expiration date.
Performance rights granted carry no dividend or voting rights. When each performance condition is satisfied, each performance right is
converted into one ordinary share of the Company with full dividend and voting rights.
Set out below are summaries of the performance rights granted:
Outstanding at the beginning of the year
4,000,000
4,000,000
2020
$
2019
$
Granted
Forfeited/cancelled
Exercised
Expired
-
-
-
-
-
-
-
-
Outstanding at year-end
4,000,000
4,000,000
There were no performance rights granted during the 2020 and 2019 financial years.
(c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the year
were as follows:
Options and performance rights issued to or vesting with employees and contractors
10,509
10,509
38,284
38,284
45
30 JUNE 2020
23. PARENT ENTITY INFORMATION
2020
$
2019
$
The following information relates to the parent entity, Key Petroleum Limited, at 30 June 2020. The information presented here has been
prepared using accounting policies consistent with those presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Loss for the year
Total comprehensive income
The parent entity is responsible for the contingent liabilities outlined in Note 16.
The parent entity is responsible for funding the commitments outlined in Note 17.
Interests in subsidiaries are set out in Note 19.
684,346
387,459
4,269,672
4,167,854
4,954,018
4,555,313
352,544
5,574
358,118
633,092
433
633,525
42,515,302
41,314,075
756,674
746,165
(38,676,076)
(38,138,452)
4,595,900
3,921,788
(537,623)
(700,463)
(537,623)
(700,463)
46
30 JUNE 2020
24.
FINANCIAL RISK MANAGEMENT
2020
$
2019
$
The Group’s financial instruments consist mainly of deposits with banks and accounts receivable and payable.
The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these
financial statements, are as follows:
Financial Assets
Cash and cash equivalents
Loans and receivables
Total Financial Assets
Financial Liabilities
Trade payables
Total Financial Liabilities
Foreign currency
Cash and cash equivalents
Sensitivity analysis
642,193
268,435
910,628
166,569
166,569
2020
NZD
446,895
1,508,545
1,955,440
267,927
267,927
2019
NZD
-
-
At 30 June 2020, if interest rates had changed by -/+ 50 basis points from the weighted average rate for the year with all other variables held
constant, post-tax loss for the Group would have been $3,597 lower/higher (2019: $3,636 lower/higher) as a result of lower/higher interest
income from cash and cash equivalents.
(a) Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that
could lead to a financial loss to the Group.
Credit risk is minimised by investing surplus funds in financial institutions that maintain a minimum of an A credit ratings and by ensuring
customers and counterparties to transactions are of sound credit worthiness.
Credit Risk Exposures
The maximum exposure to credit risk by class of recognised financial assets at balance date is equivalent to the carrying value and classification
of those financial assets (net of any provisions) as presented in the statement of financial position.
All cash holdings within the Group are currently held with A-1+ rated financial institutions.
(b) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable
securities are available to meet the current and future commitments of the Group. Due to the nature of the Group’s activities, being oil and gas
exploration, the Group does not have ready access to credit facilities, with the primary source of funding being equity raisings. The Board of
Directors constantly monitor the state of equity markets in conjunction with the Group’s current and future funding requirements, with a view
to initiating appropriate capital raisings as required. Refer to note 1 for management’s plans to remain a going concern.
The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect
management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows
presented in the table to settle financial liabilities reflects the earliest contractual settlement dates.
47
30 JUNE 2020
Financial Liability and Financial Asset Maturity Analysis
Within 1 Year
1 to 5 Years
Total
2020
$
2019
$
2020
$
2019
$
2020
$
2019
$
Financial liabilities due for payment
Trade payables (excluding estimated
annual leave)
166,569
267,927
Total contractual outflows
166,569
267,927
Financial assets – cash flows realisable
Cash and cash equivalents
642,193
446,895
Trade and loan receivables
268,435
1,508,545
Total anticipated inflows
910,628
1,955,440
Net inflow on financial instruments
744,059
1,687,513
-
-
-
-
-
-
-
-
-
-
-
-
137,500
267,927
137,500
267,927
642,193
446,895
268,435
1,508,545
910,628
1,955,440
744,059
1,687,513
(c) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. All
financial assets and financial liabilities of the Group at the balance date are recorded at amounts approximating their fair value.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-
term nature.
As disclosed in note 1 should the Company not continue as a going concern then the fair value of financial assets and financial liabilities may
not reflect the true fair value of financial assets and financial liabilities on a liquidation basis.
25. SEGMENT INFORMATION
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors (chief
operating decision makers) in assessing performance and determining the allocation of resources. During the period, the Group is managed
primarily based on one segment being oil and gas exploration in Australia.
48
30 JUNE 2020
26. COMPANY DETAILS
The registered office of the company is:
Key Petroleum Limited
Suite 8, Churchill Court
331-335 Hay Street
SUBIACO WA 6008
The principal place of business is:
Key Petroleum Limited
Suite 8, Churchill Court
331-335 Hay Street
SUBIACO WA 6008
49
DIRECTORS' DECLARATION
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 16 to 49 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2020 and of its performance for the financial year
ended on that date;
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
(c)
a statement that the attached financial statements are in compliance with International Financial Reporting Standards has been included
in the notes to the financial statements.
The directors have been given the declarations by the managing director and equivalent chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors for Key Petroleum Limited.
Geoff Baker
Non-Executive Chairman
Perth, 29 September 2020
50
Independent Auditor's Report
To the Members of Key Petroleum Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Key Petroleum Limited (“the Company”) and its
subsidiaries (“the Group”), which comprises the consolidated statement of financial
position as at 30 June 2020, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors’
declaration.
In our opinion:
a.
the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June
2020 and of its financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards
as disclosed in Note 1.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance
with the auditor independence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110
Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of
the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Material Uncertainty Related to Going Concern
Without qualifying our opinion, we draw attention to Note 1(a)(iv) in the financial report which indicates that the
company incurred a net loss of $145,922 during the year ended 30 June 2020. This condition, along with other
matters as set forth in Note 1(a)(iv), indicates the existence of a material uncertainty which may cast significant
doubt about the ability of the company to continue as a going concern and whether it will realise its assets and
extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key audit matter
How our audit addressed the key audit matter
Capitalised Exploration Costs
As disclosed in note 9 to the financial statements, as
Our audit procedures included but were not limited
to:
at 30 June 2020, the Group’s capitalised exploration
Assessing management’s determination of its
costs are carried at $4,502,264.
The recognition and recoverability of the capitalised
exploration costs was considered a key audit matter
due to:
The carrying value of capitalised exploration costs
represents a significant asset of the Group, we
considered it necessary to assess whether facts
and circumstances existed to suggest the carrying
amount of this asset may exceed the recoverable
amount; and
Determining whether impairment indicators exist
involves significant judgement by management.
areas of interest for consistency with the definition
in AASB 6 Exploration and Evaluation of Mineral
Resources (“AASB 6”);
Assessing the Group’s rights to tenure for a
sample of permits and licenses;
Testing the Group’s additions to capitalised
exploration costs for the year by evaluating a
sample of recorded expenditure for consistency to
underlying
records,
the
capitalisation
requirements of the Group’s accounting policy
and the requirements of AASB 6;
By testing the status of the Group’s tenure and
planned future activities, reading board minutes
and discussions with management we assessed
each area of interest for one or more of the
following circumstances
that may
indicate
impairment of the capitalised exploration costs:
The licenses for the rights to explore
expiring in the near future or are not
expected to be renewed;
Substantive
expenditure
for
further
exploration in the area of interest is not
budgeted or planned;
Decision or
intent by
the Group
to
discontinue activities in the specific area of
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
Key audit matter
How our audit addressed the key audit matter
interest due to lack of commercially viable
quantities of resources; and
Data
indicating
that,
although
a
development in the specific area is likely to
proceed,
the carrying amount of
the
exploration asset is unlikely to be recorded
in full from successful development or sale;
and
Assessing the appropriateness of the related
disclosures in the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group’s annual report for the year ended 30 June 2020, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also
state in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to obtain
reasonable assurance about whether the financial report as a whole is free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
−
−
−
−
−
−
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
Independent Auditor’s Report
To the Members of Key Petroleum Limited (Continued)
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2020.
The directors of the Company are responsible for the preparation and presentation of the remuneration report in
accordance with s 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of the Company, for the year ended 30 June 2020, complies with section
300A of the Corporations Act 2001.
BENTLEYS
Chartered Accountants
MARK DELAURENTIS CA
Partner
Dated at Perth this 29th day of September 2020
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information
is current as at 22 September 2020.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
The number of equity security holders holding less than a marketable parcel
of securities are (minimum $500.00 parcel at $0.0060 per unit – minimum
parcel size 83,334):
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
Number of holders
Number of shares
% of shares
Ordinary shares
67
87
125
726
944
11,170
282,547
1,128,643
38,223,665
1,928,282,101
1,949
1,967,928,126
0.00
0.01
0.06
1.94
97.99
100.00
844
23,931,942
1.22
Listed ordinary shares
Number of shares
Percentage of
ordinary shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
BNP PARIBAS NOMS PTY LTD
ASF OIL & GAS HOLDINGS PTY LTD
GREAT SCHEME INVESTMENTS LIMITED
START GRAND GLOBAL LIMITED
FOREVER NEW LIMITED
FOREVER GRAND GROUP LIMITED
RENOWN CAPITAL HOLDINGS LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR ANDREW CHRISTOPHER MAYES
CITICORP NOMINEES PTY LIMITED
COMSEC NOMINEES PTY LIMITED
283,022,808
225,372,940
178,125,000
170,000,000
152,500,000
60,000,000
32,500,000
21,318,094
20,000,000
14,624,314
13,322,476
BNP PARIBAS NOMINEES PTY LTD
13,084,681
MR GREGORY JOHN HOOK
MR MITCHELL JAMES BURGON
MR KENNETH RAYMOND PETTIT
MR RICHARD MICHAEL FREMLIN
NELVAN PTY LIMITED
MR BRIAN DESMOND MOLONEY + MRS DIANE JOY MOLONEY
JAMESON BOYCE PARTNERS PTY LTD
GRANBOROUGH PTY LTD
12,685,349
12,500,000
12,000,000
11,111,111
11,111,111
11,000,000
10,043,888
10,000,000
14.38
11.45
9.05
8.64
7.75
3.05
1.65
1.08
1.02
0.74
0.68
0.66
0.64
0.64
0.61
0.56
0.56
0.56
0.51
0.51
1,274,321,772
64.75
56
ASX ADDITIONAL INFORMATION
(c) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
BNP Paribas Noms Pty Ltd
ASF Oil & Gas Holdings Pty Ltd
Great Scheme Investments Limited
Start Grand Global Limited
Forever New Limited
(d) Voting rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
(e) Schedule of interests in petroleum blocks
Number of Shares
283,022,808
225,372,940
178,125,000
170,000,000
152,500,000
Location
Australia – Onshore
Australia – Onshore
Australia – Onshore
Australia – Onshore
(f) Unquoted Securities
Block
EP 437
L7
ATP 783/920/924
WA-481-P
Percentage held/earning
86.94%
50.00%
100.00%
40.00%
Class
Number of
Securities
Number of
Holders
Holder Name
Number of Securities
Holders of 20% or more of the class
1.5 cent Options, Expiry 30 November 2020
20,000,000
1.3 cent Options, Expiry 24 August 2022
1.3 cent Options, Expiry 27 March 2023
4,500,000
1,000,000
1
1
1
JL Kane Marshall
20,000,000
R Jason
4,500,000
M Armitage
1,000,000
57